The purposes of the Standards include all of the following except Establishing the basis for the measurement

of internal audit performance. Guiding the ethical conduct of internal auditors. Stating basic principles that represent the practice of internal auditing as it should be. Fostering improved organizational processes and operations.

Internal audit activities may involve which of the following? Assurance services. Consulting services. Both assurance and consulting services. Neither assurance nor consulting services.

An internal auditor often faces special problems when performing an engagement at a foreign subsidiary. Which of the following statements is false with respect to the conduct of international engagements? The IIA Standards do not apply outside of the United States. The internal auditor should determine whether managers are in compliance with local laws. There may be justification for having different organizational policies in force in foreign branches. It is preferable to have multilingual internal auditors conduct engagements at branches in foreign nations.

The function of internal auditing, as related to communicating results, is to Ensure compliance with reporting procedures. Review the expenditure items and match each item with the expenses incurred. Determine whether any employees are expending funds without authorization. Identify inadequate controls that increase the likelihood of unauthorized expenditures.

The function of internal auditing, as related to communicating results, is to Ensure compliance with reporting procedures. Review the expenditure items and match each item with the expenses incurred. Determine whether any employees are expending funds without authorization. Identify inadequate controls that increase the likelihood of unauthorized expenditures.

The Standards consist of three types of standards. Which standards apply to the characteristics of organizations and parties providing internal auditing services? Implementation Standards. Performance Standards. Attribute Standards. Independence Standards.

What is the responsibility of the internal auditor with respect to fraud?

The internal auditor should have sufficient knowledge to identify the indicators of fraud but is not expected to be an expert. The internal auditor should have the same ability to detect fraud as a person whose primary responsibility is detecting and investigating fraud. An internal auditor should have sufficient knowledge and training so that (s)he is able to detect fraud. An internal auditors primary role is to detect and investigate fraud.

In planning an engagement, internal auditors should consider which of the following items? I. The objectives of the activity being reviewed and the means by which the activity controls performance. II. The adequacy and effectiveness of the activitys risk management and control systems compared to a relevant control framework or model. III. The opportunities for making significant improvements to the activitys information technology systems and control systems.

I and II. II and III. I and III. I, II, and III.

Internal auditors should communicate results. Communications for assurance engagements should include I. Limitations on distribution to outside parties II. The auditors overall opinion when appropriate III. Recommendations and action plans when appropriate

II only. III only. I and II only.

I, II, and III.

The work of the internal audit activity includes evaluating and contributing to the improvement of risk management systems. Risk is I. The negative effect of events certain to occur II. Measured in terms of impact III. Measured in terms of likelihood

I only. I and II only. II and III only. I, II, and III.

The chief audit executive is best defined as the Inspector general. Person responsible for the internal audit function. Outside provider of internal audit services. Person responsible for overseeing the contract with the outside provider of internal audit services.

Internal auditors should be objective. Objectivity Requires internal auditors not to subordinate their judgment on audit matters to that of others. Is required only in assurance engagements. Is managed at the individual auditor, engagement, functional, and organizational levels.

Prohibits internal auditors from providing consulting services relating to operations for which they had previous responsibility.

The term risk is best defined as the possibility that An internal auditor will fail to detect a material misstatement that causes financial statements or internal reports to be misstated or misleading. An event could occur affecting the achievement of objectives. Management will, either knowingly or unknowingly, make decisions that increase the potential liability of the organization. Financial statements or internal records will contain material misstatements.

Use of external service providers with expertise in health care benefits is appropriate when the internal audit activity is Evaluating the organizations estimate of its liability for postretirement benefits, which include health care benefits. Comparing the cost of the organizations health care program with other programs offered in the industry. Training its staff to conduct an audit of health care costs in a major division of the organization. All of the answers are correct.

Your organization has selected you to develop an internal audit activity (IAA). Your approach will most likely be to hire Internal auditors each of whom possesses all the skills required to handle all engagements. Inexperienced personnel and train them the way the organization wants them trained. Degreed accountants because most internal audit work is accounting related.

Internal auditors who collectively have the knowledge and skills needed to perform the responsibilities of the internal audit activity.

The internal audit activity collectively must possess or obtain certain competencies, including proficiency in Internal audit procedures and techniques. Accounting principles and techniques. Management principles. Marketing techniques.

internal auditors must possess the knowledge, skills, and other competencies essential to the performance of their individual responsibilities. Consequently, all internal auditors should be proficient in applying

Internal auditing standards. Quantitative methods. Management principles. Structured systems analysis.

An internal auditor must have the knowledge, skills,

and other competencies needed to perform their individual responsibilities. Which of the following properly describes the level of knowledge, skill, or other competency required? Internal auditors must have Proficiency in applying internal auditing standards and procedures without extensive recourse to technical research and assistance. Proficiency in applying knowledge of accounting and information technology to specific or potential problems. An understanding of broad techniques used in supporting and developing engagement observations and the ability to research the proper procedures to be used in any engagement situation. A broad appreciation of accounting principles and techniques during engagements involving the financial records and reports of the organization.

In exercising due professional care, internal auditors must consider which of the following? I. The relative complexity, materiality, or significance of matters to which assurance procedures are applied II. The extent of assurance procedures necessary to ensure that all significant risks will be identified III. The probability of significant errors, irregularities, or noncompliance

I and II only. II and III only. I and III only. I, II, and III.

Fact Pattern: A staff internal auditor performed a portion of an engagement to review an organizations marketing function. In particular, the internal auditor evaluated the functions effective and efficient use of resources to identify I. Underused facilities II. Overstaffing or understaffing III. Nonproductive work IV. Procedures that were not cost justified To test for underused facilities, the internal auditor performed a complete walkthrough of all spaces assigned to the marketing function and evaluated the use of both space and capital equipment. The internal auditor analyzed reports on space usage for the last year and concluded that facilities were neither underused nor used at maximum capacity. To test for overstaffing or understaffing, the internal auditor compared current staffing levels with a staffing analysis recently completed by an independent contractor. Because the staffing analysis used work standards and service demands to provide factual and reliable information on staffing requirements, the internal auditor was able to conclude that staffing levels were optimal.

To test for nonproductive work, the internal auditor interviewed an employee from each level, and, based upon their responses, concluded that no significant amount of nonproductive work was being performed. Thus, the internal auditor concluded that additional engagement work to search for procedures that were not cost justified would not be necessary. In reference to requirements I and II, due professional care Was exercised because the internal auditor applied reasonable care and competence in both areas. Was not exercised because the internal auditor failed to apply reasonable care regarding requirement II. Was not exercised because the internal auditor failed to apply reasonable care regarding requirements I and II. Was not exercised because the internal auditor failed to apply reasonable care regarding requirement I.

With regard to the exercise of due professional care, an internal auditor should Consider the relative materiality or significance of matters to which assurance procedures are applied. Emphasize the potential benefits of an engagement without regard to the cost. Consider whether criteria have been established to determine whether goals are achieved, not whether those criteria are adequate. Select procedures that are likely to provide absolute assurance that irregularities do not exist.